Microsoft CEO Pick Leaves Losers Grappling With Fallout

Satya Nadella, chief executive officer of Microsoft Corp., is seen in this undated handout photo released to the media by the company. Source: Microsoft Corp.

Feb. 4 (Bloomberg) -- Now that there’s a winner for the
chief executive officer position at Microsoft Corp., those who
lost out on the job will need to decide whether to stick around.

With Microsoft’s board disclosing today that it picked
Satya Nadella as CEO, that leaves internal candidates such as
Executive Vice President Tony Bates and Chief Operating Officer
Kevin Turner among those who failed to get promoted, people with
knowledge of the search have said. Stephen Elop, the former CEO
of Nokia Oyj who was set to join the software maker after it
closes a $7.2 billion deal for Nokia’s handset unit, was also on
the shortlist, among others.

While there’s no telling how long some executives might
stick around were a better offer to come along, the conclusion
to Microsoft’s search may not spark an immediate exodus, said
people with knowledge of the matter. The CEO candidates were
informed that they didn’t get the role last week, said people
familiar with the matter, who asked not to be identified because
the information is private, giving the executives time to work
out some next steps.

Turner plans to stay at the Redmond, Washington-based
company, said a person close to the COO. And while Bates and
Elop both have ambitions to be CEO, they are also set to
continue at Microsoft for the time being since success in their
current jobs may be the best way to attract other offers, said
people close to the executives, who asked not to be identified
because the information is private.

Monetary Incentives

Some of them have other incentives to remain. Elop will
make roughly $25 million if he stays at Microsoft for 18 months,
as per Microsoft’s acquisition agreement with Nokia. Turner
holds 1.4 million Microsoft shares while Bates has 601,777,
according to data compiled by Bloomberg.

By choosing Nadella -- a 22-year Microsoft veteran -- as
CEO, executives can also anticipate relative stability in their
roles, said James Staten, an analyst at Forrester Research in
Cambridge, Massachusetts. If Nadella wants to make changes, they
should come relatively quickly as he knows Microsoft’s
executives well.

“He’s already formed opinions about the people who will
now be working for him,” said Staten.

Elop and Bates didn’t return requests for comment. Peter
Wootton, a spokesman for Microsoft, declined to comment or make
any of the executives available.

In Demand

Even if there are no immediate departures, some of the
candidates have been in demand for other jobs before. Bates, who
was formerly at Cisco Systems Inc. and ran the Skype unit at
Microsoft, was considered for the CEO post at Intel Corp. before
the chipmaker named Brian Krzanich to the post last May, said
people familiar with that search.

“I could see Tony leaving,” said Matthew Hedberg, an
analyst at RBC Capital Markets. “He’s not a lifer at the
company like some of the others.”

Chuck Mulloy, a spokesman for Intel, declined to comment.

After three years as CEO of Nokia, Elop will probably also
eventually consider CEO options that come his way, said a person
close to him.

That Nadella may initially have some stability in the
executive ranks may be a boon as Microsoft shifts away from
software to focus on computing devices and cloud services.
Microsoft has been struggling to catch up with rivals including
Apple Inc. and Google Inc. in mobile as consumers gravitate away
from using its software on personal computers.

Last month, Microsoft posted record fiscal second-quarter
sales that exceeded analysts’ estimates. Results were helped by
strong sales of the Xbox game console and cloud services.

“The quarterly results, despite the horrible market, are a
tremendous reaffirmation of the present leadership,” said
Jeffrey Sonnenfeld, senior associate dean at the Yale School of
Management. The lack of an exodus “is a healthy thing.”